Renewed Greece Jitters, Weak US Data Rattle Markets
By FABIO ALVES
OF DOW JONES NEWSWIRES
NEW YORK -- Mounting concerns over Greece's budget situation and weaker-than-expected U.S. economic data rattled financial markets Thursday, prompting investors to shun risky assets as confidence in the global economic recovery deteriorated.
The sell-off was triggered overnight when Moody's Investors Service reaffirmed that Greece's A2 debt rating may be cut if the Greek government doesn't act forcefully to cut its ballooning deficit. It followed a similar warning a day earlier from Standard & Poor's Corp.
Sentiment further soured after data showed the number of U.S. workers filing new claims for jobless benefits unexpectedly surged last week to the highest level in more than three months.
U.S. Treasury prices, the ultimate safe-haven trade in times of global uncertainty, jumped, sending yields on the 10-year note down 4.4 basis points. Yields move inversely to prices. The dollar, which also benefits from a retreat in global appetite for risky assets, soared against currencies most sensitive to global growth prospects, including the Australian and Canadian dollars.
The Dow Jones Industrial Average recently fell more than 170 points, with all its components in the red. The Standard & Poor's 500-share index slid 1.3%, on the heels of weakness across the board in European markets.
The moves underscore the on-again, off-again pace of the global economic recovery and the vulnerability of financial markets to the potential European sovereign-debt crisis. The dismal jobless-claims data in the U.S. followed recent other heavyweight data, including reports on new-home sales and consumer confidence, all of which have cast a gloom over the pace of the economic recovery.
"Investors are making a call for global growth weakness ahead," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn. "Investors are increasingly concerned that [Federal Reserve's Chairman Ben] Bernanke's mentioned recovery is going to be nothing more than a tepid recovery."
Industrial machinery stocks were hit hard, with Caterpillar Inc. (CAT) among the worst performers in the sector, as investors again fled the cyclical stocks tied closest to the economy's performance. The industrial machinery giant, which is often among the biggest% changers in the index whether up or down, fell 2.3% to $55.62 in recent trading.
Initial claims for jobless benefits rose by 22,000 to 496,000 in the week ended Feb. 20, according to the Labor Department's weekly report. The previous week's level was revised upward to 474,000 from 473,000. That brings claims to their highest levels since Nov. 14.
Oil prices erased all their Wednesday gains and then some amid renewed concerns about Greece's debt and the disappointing data. April crude futures were trading at $77.16 a barrel, down 3.5%.
Unemployment can be devastating for U.S. gasoline demand, which makes up about 10% of total world oil consumption: It means that fewer people will drive to work, and they are likely to spend less on discretionary driving this summer.
"It looked as if the sell-off in the European equity market and U.S. equity market pushed oil prices off where we reached yesterday on fears that there might be downgrade by credit-rating agencies on Greece's debt," said Gene McGillian, an analyst with Tradition Energy in Stamford, Conn.
Greece Looms Large
Greece's sovereign crisis has loomed large over financial markets this year. The country is under intense pressure by the European Union and financial markets to bring down its budget gap, which hit an estimated 12.7% of gross domestic product last year, four times above EU limits.
Greek government bonds tumbled again Thursday after protests and the latest downgrade warning from S&P, which clouded prospects for the government's pending launch of a new 10-year bond issue to cover funding gaps. Greek 10-year yield spreads over euro-zone benchmark German bunds surged as high as 364 basis points, with the Greek bond yielding 6.75% versus 3.11% for the 10-year German bund.
The euro, meanwhile, was at $1.3476 from $1.3525 late Wednesday, according to EBS via CQG. The common currency rebounded from a low of $1.3451, though traders reiterated sentiment remains negative on the common currency, which also has been battered by the Greece jitters.
The dollar was at Y88.88 from Y90.17, while the euro was at Y119.77 from Y121.95. The U.K. pound was at $1.5201 from $1.5398.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.097 from 80.847.
The U.S. corporate bond markets also took a hit amid worsening investor sentiment. The high-grade benchmark derivatives index, the Markit CDX NA IG, is wider at 94.8 basis points from 93.2/94.2 basis points late Wednesday, according to Markit data.
"The jobless claims data undermines recent optimism regarding an accelerating U.S. recovery," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. "Risk aversion is the primary theme of the market and [the jobless claims data] add to the already negative sentiment in the financial markets...by news of another possible downgrade of Greece's debt ratings."
(Brian Baskin, Min Zeng, Anusha Shrivastava, Kristina Peterson, Kathleen Madigan, Emese Bartha and Costas Paris contributed to this article.)
By FABIO ALVES
OF DOW JONES NEWSWIRES
NEW YORK -- Mounting concerns over Greece's budget situation and weaker-than-expected U.S. economic data rattled financial markets Thursday, prompting investors to shun risky assets as confidence in the global economic recovery deteriorated.
The sell-off was triggered overnight when Moody's Investors Service reaffirmed that Greece's A2 debt rating may be cut if the Greek government doesn't act forcefully to cut its ballooning deficit. It followed a similar warning a day earlier from Standard & Poor's Corp.
Sentiment further soured after data showed the number of U.S. workers filing new claims for jobless benefits unexpectedly surged last week to the highest level in more than three months.
U.S. Treasury prices, the ultimate safe-haven trade in times of global uncertainty, jumped, sending yields on the 10-year note down 4.4 basis points. Yields move inversely to prices. The dollar, which also benefits from a retreat in global appetite for risky assets, soared against currencies most sensitive to global growth prospects, including the Australian and Canadian dollars.
The Dow Jones Industrial Average recently fell more than 170 points, with all its components in the red. The Standard & Poor's 500-share index slid 1.3%, on the heels of weakness across the board in European markets.
The moves underscore the on-again, off-again pace of the global economic recovery and the vulnerability of financial markets to the potential European sovereign-debt crisis. The dismal jobless-claims data in the U.S. followed recent other heavyweight data, including reports on new-home sales and consumer confidence, all of which have cast a gloom over the pace of the economic recovery.
"Investors are making a call for global growth weakness ahead," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn. "Investors are increasingly concerned that [Federal Reserve's Chairman Ben] Bernanke's mentioned recovery is going to be nothing more than a tepid recovery."
Industrial machinery stocks were hit hard, with Caterpillar Inc. (CAT) among the worst performers in the sector, as investors again fled the cyclical stocks tied closest to the economy's performance. The industrial machinery giant, which is often among the biggest% changers in the index whether up or down, fell 2.3% to $55.62 in recent trading.
Initial claims for jobless benefits rose by 22,000 to 496,000 in the week ended Feb. 20, according to the Labor Department's weekly report. The previous week's level was revised upward to 474,000 from 473,000. That brings claims to their highest levels since Nov. 14.
Oil prices erased all their Wednesday gains and then some amid renewed concerns about Greece's debt and the disappointing data. April crude futures were trading at $77.16 a barrel, down 3.5%.
Unemployment can be devastating for U.S. gasoline demand, which makes up about 10% of total world oil consumption: It means that fewer people will drive to work, and they are likely to spend less on discretionary driving this summer.
"It looked as if the sell-off in the European equity market and U.S. equity market pushed oil prices off where we reached yesterday on fears that there might be downgrade by credit-rating agencies on Greece's debt," said Gene McGillian, an analyst with Tradition Energy in Stamford, Conn.
Greece Looms Large
Greece's sovereign crisis has loomed large over financial markets this year. The country is under intense pressure by the European Union and financial markets to bring down its budget gap, which hit an estimated 12.7% of gross domestic product last year, four times above EU limits.
Greek government bonds tumbled again Thursday after protests and the latest downgrade warning from S&P, which clouded prospects for the government's pending launch of a new 10-year bond issue to cover funding gaps. Greek 10-year yield spreads over euro-zone benchmark German bunds surged as high as 364 basis points, with the Greek bond yielding 6.75% versus 3.11% for the 10-year German bund.
The euro, meanwhile, was at $1.3476 from $1.3525 late Wednesday, according to EBS via CQG. The common currency rebounded from a low of $1.3451, though traders reiterated sentiment remains negative on the common currency, which also has been battered by the Greece jitters.
The dollar was at Y88.88 from Y90.17, while the euro was at Y119.77 from Y121.95. The U.K. pound was at $1.5201 from $1.5398.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.097 from 80.847.
The U.S. corporate bond markets also took a hit amid worsening investor sentiment. The high-grade benchmark derivatives index, the Markit CDX NA IG, is wider at 94.8 basis points from 93.2/94.2 basis points late Wednesday, according to Markit data.
"The jobless claims data undermines recent optimism regarding an accelerating U.S. recovery," said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington. "Risk aversion is the primary theme of the market and [the jobless claims data] add to the already negative sentiment in the financial markets...by news of another possible downgrade of Greece's debt ratings."
(Brian Baskin, Min Zeng, Anusha Shrivastava, Kristina Peterson, Kathleen Madigan, Emese Bartha and Costas Paris contributed to this article.)
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